GEN - Competition Tribunal - Tribunal finds Senwes has contravened Competition
JSE
GEN
GEN - Competition Tribunal - Tribunal finds Senwes has contravened Competition
Act
Tribunal finds Senwes has contravened Competition Act
The Competition Tribunal, on 3 February 2009, found that Senwes has contravened
the Competition Act by denying grain traders the benefit of an annual storage
discount which they had previously enjoyed.
The Tribunal has not yet imposed a remedy on Senwes as by virtue of an agreement
with the parties it was asked to make a finding first on whether there had been
an anticompetitive practice. The Tribunal has however found that the
contravention is one for which a fine is not competent for a first time
contravention.
The Tribunal has also recommended that a Senwes employee, who admitted in the
course of his evidence to having perjured himself, be prosecuted. This is the
first time that the Tribunal has made such a recommendation
Senwes, which had been a co-operative until 1997, is now a public company
providing agricultural services. This case concerns its activities in the grain
storage and grain trading markets. Senwes owns a near monopoly in silo capacity
in its area a crucial area of grain production for the country. Senwes provides
storage both to farmers and traders. Senwes also competes in the trading market
against its trading customers.
The Tribunal found that the change in practice, introduced in 2003, raised the
costs of rival traders who compete with Senwes` trading division in the Senwes
area, comprising most of the Free State and portions of adjacent provinces
Prior to 2003, both traders and farmers who stored their grain at Senwes silos
paid a daily storage fee up until 100 days. Thereafter storage was free until
the end of that season. This allowed traders the freedom to sell grain late in
the season without being burdened by heavy storage costs.
In May 2003 Senwes removed the capped tariff from traders and offered it only to
farmers. A trader however who stored longer than 100 days continued to pay the
daily tariff. If a farmer applied for a silo certificate then that farmer would
be regarded as a trader and would be put on to daily tariff from the day of the
request for the silo certificate. The reason for this is that a farmer who
applied for a certificate, a pre-requisite to trading grain on Safex, was
assumed to be ready to trade his grain and hence should be treated as if he was
trader
The change in practice made trading late in the season too costly for rival
traders, and as a result they now trade less in the Senwes area during the
latter half of the season. In competition parlance this practice is referred to
as a `margin squeeze`, and occurs when a dominant firm in an upstream market
supplies rivals who compete with it in a downstream market in a manner that
prevents its rivals from making an economically viable price- cost margin.
Date: 04/02/2009 10:03:01 Produced by the JSE SENS Department.
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